A view from the South

Ομιλία στο συνέδριο της Ευρωπαϊκής Επιτροπής και της Πορτογαλικής Προεδρίας της Ευρωπαϊκής Ένωσης «Η κοινωνική προστασία ως παραγωγικός συντελεστής» (Porto, Απρίλιος 2000)

In the interests of complementarity, I will concentrate on a small number of issues, examined from the vantage point of southern Europe.

Ιn the past, social welfare in southern Europe was widely held to “lag behind” compared to the rest of Europe: to use a terminology characteristic of that school of thought, it was considered to be “rudimentary”. For a long time, for most northern European researchers and social policy analysts south Europe (with the partial exception of Italy) was terra incognita. My own country, Greece, was rarely included in comparative work, but was believed to fit perfectly the “rudimentary” label, presumably by virtue of being the least prosperous among European Union members and the most “southern” of south European countries.

More recent research showed this to be the product of a misreading of southern welfare’s distinct nature. It has now been clearly established that certain “core” welfare programmes (e.g. pensions), far from being “rudimentary”, stand out in terms of generosity in the entire continent. In fact, the problem with welfare arrangements in southern Europe is not that they are in some sense “behind” as a whole, but that they are seriously out of balance, uneasily combining substantial coverage gaps with “islands of overprotection”, in a mix that is at once politically explosive and socially unhappy.

A close examination of social policy developments in the last 20 or so years confirms this latter, much subtler interpretation. As a matter of fact, social protection systems in southern Europe have converged to a remarkable degree with the rest of Europe in quantitative terms, though they still retain various “southern” peculiarities. As it happens, it is precisely these peculiarities that give rise to the inefficiencies and inequalities which, in my view, make the need for reform so urgent.

The specific traits of the “southern model of welfare” have been made sufficiently clear in the last four or five years to make it unnecessary to go through all of them again in much detail. It is sufficient to state here that the southern model can be identified by reference to a few “imbalances” or sharp contrasts:

- between cash benefits (on which heavy emphasis is placed) and social services (which are still mostly privately rather than collectively provided, either by informal carers within the family or, less commonly, by volunteers);

- between contributory, social insurance benefits (above all pensions) and the non-insurable social risks such as poverty and long-term or youth unemployment, that are covered either inadequately or not at all;

- within the income maintenance system, between the generous pensions and other benefits enjoyed by the “protected categories”, and the very modest ones provided to the growing ranks of labour market “outsiders”;

- and lastly in health care, between the fiction of a universal national health service, and the fact of a mixed market including a thriving private sector with whom the public service coexists and with whom it sometimes develops improper relationships.

Alongside these rather structural imbalances, the welfare states of southern Europe have to cope with a number of challenges that are the result of the rapid economic and social changes of recent decades. It has been customary to refer to adverse demographic trends, to the crisis of the traditional family, to the societal “turbulances” associated with immigration, and to the instability of the labour market, of which high unemployment is but one symptom, though certainly the most acute.

The list sounds familiar, but in each of the above items there is a twist that is peculiarly southern. For instance, unemployment has not (perhaps, not yet) undermined the still prevalent pattern of the male breadwinner, but it disproportionally affects women and the young, limiting their autonomy and reinforcing their dependance on the aforementioned male breadwinner. Partly as a result of that, family formation is delayed and birth rates remain low and falling, further aggravating the demographic complications deriving from the otherwise welcome increase in life expectancy. Moreover, while immigration has become a permanent feature in the European social landscape, nowhere else has the transition from emigration to immigration been completed at such speed as in the countries of southern Europe. The social tensions arising from the massive population movements witnessed in the last 10 or so years have made progress towards integration slower and more uneven than might have been.

This is a formidable set of problems, at a time when the room of manoeuvre in terms of fiscal and monetary policy at the disposal of national governments is clearly limited. Governments intent to breath new life to the “European model” by reforming it have to face unpleasant dilemmas. This is not to say that paralysis is inevitable. Quite the contrary: after all, the last years have seen interesting, even exciting, developments in social policy in all south European countries. What is more, a reform agenda seems to be taking shape which, if carried out in full, promises radically to renew the institutional architecture of the welfare state, bringing it in line with the vibrant societies and the dynamic economies that have emerged in this southern belt of the continent.

Once again, it would be impossible to do full justice to this policy agenda here, but three issues seem to be standing out in terms of their significance.

Developing social services, as distinct from merely handing out cash benefits, is the first such issue. This is an area that has long been neglected, presumably under the influence of a rather conservative conception of “subsidiarity”, in this context of the respective roles of state and family in child care and care for the elderly. This has always been a bargain that put the burden on women, obliging them to look after both children and elderly relatives, making it impossible for many of them to pursue more fulfilling careers in the labour market. What is more, the changes in family structure at which I hinted earlier make the option of relying on an unpaid army of informal carers no longer viable. In this sense, the recent growth in social services in southern Europe, often supported by the European Union, is an encouraging sign.

New initiatives, e.g. the “Home Help” in Greece project targeted to those elderly with partial loss of autonomy, or the concerted effort in the same country to increase the availability of good-quality, affordable child care, may look modest at first. However, on closer inspection, they have the advantage of setting in motion a virtuous circle: on the one hand, by providing much needed services to the respective “client groups”; on the other, by enabling the women of the families concerned to reconcile work and family responsibilities; at the same time, by opening employment opportunities in the provision of these services, creating a predominantly female labour force and thereby boosting female employment rates. This rather happy tale has a further twist, which is the sometimes unsuspected vitality of civil society, as it manifests itself in the varied activities of the plethora of voluntary organisations that have sprung up in recent years.

The second item on the reform agenda that is beginning to appear in southern Europe consists of attempts to enhance the overall distributional impact of social transfers. In some countries, this impact remains low in terms of poverty reduction, despite the often spectacular growth in social spending. On surface, this is hardly new: notions of targeting and selectivity have been fashionable for at least two decades. What is new is the coupling of income support with the provision of “social integration” services. This combination, especially evident in minimum income schemes like the Portuguese RMG, seems capable of achieving multiple objectives at once. On the one hand, it genuinely offers beneficiaries skills that can help them plot an escape route from poverty; on the other hand, it acts as a screening device to complement traditional means-testing in a context of limited administrative capabilities and unreliable tax records. Such an approach substantially reduces the inter-related risks of poverty traps, perverse equity outcomes and “welfare backlash” often associated with traditional targeting, especially of the negative variety. On the contrary, it holds the prospect of extending social protection, to include groups that until recently remained beyond the reach of conventional social insurance, membership of which has long been reserved to the protected categories of “core labour markets”.

Last, and obviously anything but least, there is the hottest of all hot potatoes: pension reform. Again, though the relevant issues are well rehearsed to the point of saturation, there are additional dimensions to this subject when observed from a south European point of view. Chief among these is the growing realisation that pension reform is not only, perhaps not even primarily, a question of balancing budgets, but a question of equalising social rights: to the benefit both of social groups discriminated against by current arrangements (i.e. workers with non-standard employment records), as well as of the proverbial future generations who certainly cannot be made to carry an excessively heavy burden. There is an ongoing debate on the merits and demerits of alternative scheme designs, which deserves separate treatment elsewhere. In any case, full portability of entitlements and a much stronger link of benefits to contributions (stopping short of full proportionality in the interests of social justice) could facilitate both labour mobility as well as the fight against contribution evasion, on which the attempt to boost the revenue base of pension schemes must by necessity rely.

It would be naïve to deny that these issues constitute a politically contested territory on which distinct ideas, values and projects clash. The contest is wide open and, as a result, its outcome remains uncertain. Reform may well be inescepable, but it can go either way. For example:

- the growth of personal social services may be limited to profitable segments of the market, or, alternatively, it may lead to better services to those who need them most, whether they can afford to pay for them or not;

- the shift towards greater selectivity may be narrowly implemented as an assault on universal benefits, intended to reduce overall expenditure but bound to create perverse incentives at the micro level, or, alternatively, it may inspire concerted efforts to reduce poverty and increase equality;

- pension reform may be presented as a fiscal inevitability, or, alternatively, it may be recognised as a great opportunity to redress the balance of social protection between programmes, between population groups, between generations.

I personally hope that the latter view prevails, but this is a personal preference, not a matter of wider interest. The relevant point here is that most south Europeans who hold dear the values underpinning the European social model have little to lose and rather a lot to gain from welfare reform, if it is interpreted as a unique opportunity to introduce social citizenship where none yet exists.

From a historical perspective, the welfare state has been a very succesful institution, largely because although it originally came to life to achieve social objectives, it has been able to further economic ones as well, i.e. to correct market failures and to foster economic growth. If the welfare state is to play a similar role in the vastly changed conditions of the early 21st century, it must find new ways to perform the same trick. The reforms sketched before may or may not be an example of policies which promote economic efficiency and improve equity at the same time, but the search for such policies must continue.

The view of social protection as a productive factor promoted at this conference, an excellent idea of the Portuguese Presidency, is a powerful, timely, reminder that, if anything, European economies cannot afford not to have a welfare state. The same ought to be said about the favourable economic effects of social protection as a “shock absorber” and a social stabiliser. In fact, there is much more to social protection as a productive factor than merely a vehicle for investment in human capital. If that were all there is to it, then Ancient Sparta would offer an optimal social protection model.

The Spartan model for improving human capital, as you no doubt recall, chiefly consisted in pushing disabled babies off the cliff, and forcing the old and the sick to take their own lives as they began to be a liability and a net claim on society’s resources. Rather fortunately, Europe has always felt greater cultural affinity to Ancient Athens instead, whose inhabitants tended (and, arguably, still tend) to take a more relaxed view of whether or not we can afford to look after those less fortunate than themselves.